Liz Claiborne to add marketing, stores for Juicy, Lucky

AndriaCheng

NEW YORK (MarketWatch) -- For the first time since Liz Claiborne bought Lucky Brand Jeans in 1999, the rock 'n roll-inspired denim label will have its own full-scale nationwide marketing campaign.

So will brands including Juicy Couture and Kate Spade, three of the four brands the New York-based Liz targets to be its major growth drivers in the next three years. Mexx, the European clothing label Liz bought in 2001, is the fourth label.

The company has a lot of high hopes for the four brands it acquired in the past eight years. Over the next three years, Liz plans to spend a combined $400 million to open more than 300 stores under those labels and more than double its marketing spending.

It also will expand the brands internationally in markets such as Japan and China and extend into new product categories, including dog fragrance.

"It's about building powerful brands," said Chief Executive Bill McComb, who joined Liz eight months ago, in an interview at the company's analyst meeting in New York. "Power brands command high multiples and high multiple EPS growth."

The four labels together are expected to increase to 60% of the company's total sales in 2010 from an estimated 42% this year as Liz faces decreasing sales to department stores, traditionally its largest customers.

Liz
LIZ
which has more than 40 brands, said Wednesday it's putting 16 labels, including Ellen Tracy, Sigrid Olsen and Dana Buchman, under strategic review for possible sale, licensing opportunity or outright exit as it concentrates its resources for fewer brands with higher growth potential. See full story.

"They are focusing on the right things," said Goldman, Sachs analyst Margaret Mager, in an interview at the company's first-ever analyst meeting where executives laid out the strategy for the company's growth in the next three years.

Juicy expansion

Total store count under Juicy and the other three brands is expected to increase by more than 60% to 854 in 2010. Liz will double its marketing investments for the brands to 3% to 5% of their sales from about 1% to 2%.

There's a lot of "upside potential" from almost no marketing to increased marketing investments, McComb said at the meeting, where founders or chief of Juicy Couture, Lucky Brand Jeans and Mexx flew in from California and Europe to sit in the front row alongside other top Liz executives.

Juicy Couture, which had less than $50 million in sales when Liz bought it in 2003, is expected to have revenue of $450 million this year.

The company estimates sales to surge by more than half to as much as $700 million in 2010, driven by retail store openings both within and outside of the U.S. and expansion in categories such as kids, men's, fragrance and pet products. The number of stores is expected to more than double to 140 in 2010 from 56. The label didn't have its own store when Liz first bought it.

Lucky Denim Highway

Lucky Brand Jeans, which Liz bought in 1999 with sales of $60 million, is forecast to have sales of $460 million this year, the company said. Sales from the label will increase to as much as $650 million in three years as it adds more tops, accessories and expands in kids' apparel, including setting up more shop-in-shop sections this holiday season.

The brand will unveil a nationwide print campaign as well as grass-roots marketing titled "Lucky Denim Highway," which involves a bus going to music venues and sporting events with pop-up shops that give out coupons, said Jill Granoff, executive vice president of direct brands, composed of the four brands. Store count will double to 280 by 2010 from an estimated 182 this year.

In response to questions from analysts on concern about possible over-saturation as Liz expands the brands, McComb and other executives said at the meeting they don't see any slowdown in Juicy or Lucky. Lucky's same-store sales are expected to rise 5 percent this year, following 20 percent gains in each of the past two years, executives said.

Mexx; Kate Spade

Mexx is closing its U.S. Mexx stores and will introduce a new concept in Europe. It plans to leave certain unprofitable markets and shutter underperforming outlets in the U.K., said Jeff Fardell, CEO of Mexx Europe. Sales of the label are forecast to rise to as much as $1.5 billion in three years from $1.2 billion this year, the company said.

Kate Spade, which Liz bought late last year, will name a chief executive for that label in the next two weeks, McComb said. Founders Kate and Andy Spade will stay on as chief creative officers, he said.

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